InvestorQ : We hear a lot about risk off trading in India. What is that?
Tisha Malhotra made post

We hear a lot about risk off trading in India. What is that?

Answer
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divya Sing answered.
2 years ago


To be fair, a risk-off trade has already started. As the Greek crisis began to unfold, we could see the money flows into US bonds and German bunds as they are considered safe-haven assets. However, low to negative yields has been a major bottleneck for both these asset classes. A rate hike will improve the yields on these bonds and force a rush of money into these assts. In fact, the experience in the past has been that FPIs tend to sell out of emerging market debt to invest in developed market debt, whenever there has been a rate hike. India did see that happen in 2013 and that is surely a situation that India would like to avoid.